Absolute poverty in China
Scholars, government agencies and international organisations have used different poverty lines in their research. So, there is a range of estimates of the level of poverty in China (see e.g.,
Li et al., 2013: 74, Table 2.16).
But all studies point to a large decline over the past 40 years, irrespective of which poverty line is used (
Ravallion and Chen, 2007;
Zhang et al., 2014).
Appleton et al. (2010) argue that
the main driver of poverty reduction in China is economic growth, not redistribution or anti-poverty programmes. And since absolute poverty in China is “predominantly a rural phenomenon” (
Gustafsson and Zhong, 2000: 984), it was “[g]rowth in the primary sector (primarily agriculture) [that] did more to reduce poverty” (
Ravallion and Chen, 2007: 2).
The critical policy change that spurred rural growth in the 1980s was the decollectivisation of agriculture and the return to family farming (
Oi, 1989).
It is well-known that
income inequality in China has risen very sharply since the mid-1980s (
Chan et al., 2019;
Xie and Zhou, 2014). It might be thought that a higher level of inequality is the necessary price to pay for the economic growth that is needed to reduce poverty. But there is no evidence for this. As
Ravallion and Chen (2007: 3) observe, “[t]he periods of more rapid growth did not bring more rapid increase in inequality. Nor did provinces with more rapid rural income growth experience a steeper increase in inequality. Thus, provinces that saw a more rapid rise in inequality saw less progress against poverty, not more”.
The progress in poverty reduction was uneven, with “[h]alf of the decline in the number of poor came in the first half of the 1980s” (
Ravallion and Chen, 2007: 2). After the mid-1980s, the poverty headcount continued to fall, but there were reverses and the rate of decline slowed down considerably.
Spatially speaking, there is more poverty in Western China than in the central provinces which, in turn, are poorer than the provinces on the Eastern coast (
Gustafsson and Sai, 2009).
Li et al. (2013: 76) observe that “
by all measures, China's poor is heavily concentrated in the West”.
Of even greater importance than the regional difference is the urban–rural divide.
Ravallion and Chen (2007: 8) show that “[f]or all years and all measures, rural poverty incidence exceeds urban poverty and by a wide margin”. Similarly,
Li et al. (2013: 75) report that “using absolute poverty measures, more than 95 percent of the poor were rural”.
The concentration of poverty in rural areas is a direct consequence of the pre-reform strategy of fuelling industrialisation by squeezing the countryside (
Oi, 1989). Before the market reform, urbanites enjoyed secure employment and a wide range of benefits and services that were provided through their work units (
danwei). Although meagre by Western standards, income and consumption were far higher in Chinese cities than in the countryside.
This created a strong incentive for peasants to move to the cities. To restrict rural–urban migration, a system of household registration (
hukou) was introduced in the 1950s which has for decades “effectively bound peasants to the soil” (
Whyte, 2005: 10). Restriction on migration has gradually been relaxed and there are now over 200 million internal migrants in China (
Liang et al., 2014). But
hukou still exists as a legal category. Migrant workers living in cities do not have access to health care, education, or other public services that are available to those with urban
hukou (
Chan and Zhang, 1999). Furthermore, as migrants tend to work in unskilled, low-wage jobs, they are typically found at the bottom of the urban economic hierarchy.
Despite that, the impact of migration on urban poverty seems quite small.
Park and Wang (2010) show that in terms of housing conditions and other non-monetary welfare indicators migrants are indeed worse off than non-migrants. Migrants also earn lower hourly wages. But as they tend to work longer hours and have a lower dependency ratio in their household, the gap in disposable income between migrant and non-migrant households is smaller than might be expected. Overall,
Park and Wang (2010: 55) conclude that the difference in poverty rate among migrants and non-migrants is very small and that “including migrants has a negligible impact on the overall urban poverty estimates”.
In the countryside, remittances from migrants certainly help raise household income. But
Du et al. (2005: 706) point out that “[t]he poorest rural households with few laborers and poor human capital are unable to allow members to migrate”. Thus, “the overall impact of migration on [rural] poverty headcount has been modest”.
Although poverty in China is concentrated in the countryside,
urban Chinese have been facing greater poverty risks since the mid-1990s. In particular, state-owned enterprise (SOE) reforms had led to 28 million workers (about a quarter of the SOE workforce) being laid off (
Appleton et al., 2014). This contributed to the doubling of the urban unemployment rate from 6% to 12% between 1993 and 2000 (
Meng and Gregory, 2007).
Other reforms also put economic pressure on city dwellers. In particular, the Chinese state used to subsidise urbanites’ food consumption through a coupon system. The value of the coupons distributed to each household was a function of its size and the age of its members. The coupon system was abolished in 1993 and food price control was lifted. Although urban wages had gone up, giving urbanites greater spending power to cope with food price inflation, larger households with few working members lost out in this reform (
Meng and Gregory, 2007). Also, urbanites now need to pay for many public services, for example, education and health care, that were previously free or heavily subsidised.
In response to the growing economic hardship in the cities, the Chinese state piloted a minimum living standard guarantee programme (
dibao) in Shanghai in 1993, which was then rolled out across urban China in 1999. In 1999, 2.7 million urbanites were enrolled on
dibao, rising to 23.4 million in 2008 (
Gustafsson and Deng, 2011). A
dibao programme for rural China was launched later and became nationwide in 2007. By 2012, it covered 53 million people, about 8% of the rural population (
Li and Sicular, 2014).
As with many social programmes in China, the implementation of
dibao is very decentralised. Municipal and provincial authorities have a lot of leeway in setting the
dibao line, determining the eligibility criteria, and so on (
Ravallion, 2014). The
World Bank (2009: 123–124) reports that in 2004 the income threshold for rural
dibao ranges between 120
yuan and 1560
yuan per person per year. In any case, due to the restricted coverage of the
dibao programmes, their impact on poverty reduction is limited (
Chen et al., 2006;
Li and Sicular, 2014). Overall, a good deal is known about absolute poverty in China. But, as I will show below, relative poverty is a different story altogether.